Residential real estate: It's a seller's market

When Paul and Susan Gutterman sunk a “for sale” sign in the front lawn of their Southwest Ocala home earlier this year, they did not think they would be selling any time soon.

But in less than five days, a “sale pending” sign emerged and the Guttermans were scrambling.

“We were flipping out. What were we going to do? We had 30 days to move out,” Paul Gutterman recalled. “I didn’t think it would work like that.”

“We were just testing the waters, but then (the buyers) came in at full (asking price),” he said. “We weren’t looking for a (new) house, but we were after that.”

Finding another house wasn’t easy. They are still renting but will soon close on another house.

“We just made the best of it,” he said, referring to the quick sale of the three-bedroom, two-and-a-half bath home.

While the home sale was fast, it should not have been surprising given the dwindling supply of homes like the one owned by the Guttermans.

It is a seller’s market, local industry experts contend, and monthly sales reports from the Ocala/Marion County Association of Realtors back them up.

And it is likely to stay that way for many months.

Why?

The inventory of existing homes on the market, especially the traditional three-bedroom, two-bath types, has been shrinking since the end of the recession. At the beginning of 2013, there were about 3,500 existing Marion County homes on the market. That dropped to 2,551 in September 2017, the latest month for which that data is available.

That’s a 4.8-months' supply at current sales rates if another home isn’t added to the market. A six-months' supply favors neither the seller or buyer.

This data does not include homes sold by the homeowner; it only includes Realtor sales.

As supply dwindled, median sales prices rose. In September, the median sales price rose nearly 13 percent compared to the same month a year before, reaching $157,750 — the highest since the end of the recession.

Sellers are not lowering prices much, if at all. Median sales prices are 96.1 percent of original asking prices. That was the second highest it has been in at least four years.

Meanwhile, the median time between the listing of the home and when a buyer signs a contract on the property has also shrunk. In September, that dropped to 46 days, a 22 percent decline from the same month a year ago and the quickest time in at least four years.

“It’s a seller’s market, and if it’s priced right, it’s selling,” said Vicky Morrison, Realtor and broker-owner of Bricks & Mortar Real Estate Development in Ocala.

So, why are people not putting their homes on the market these day?

Morrison cited multiple reasons.

“I think people like their homes,” she said. They are in no hurry to sell and move.

The supply shortage also is compounded by the influx of new employers, such as the FedEx and AutoZone distribution centers. That is bringing more people to Ocala who need a place to live, she said. That’s created more competition for the few homes available.

As for the rising prices: Morrison said they are to be expected and reflect the value of the homes on the market and the demand for them.

Although the price increases show a similar trajectory that existed before the housing market crashed in 2008, Morrison said the current market is healthier and prices are more reasonable.

“I don’t see anything out of the ordinary,” she said. “When I see the appraisals ... it looks like it's making sense.”

And unlike before the recession, when investors were buying houses only to flip them later for a profit, Morrison said she is seeing most of her homes purchased by people planning to live in them.

“It’s not crazy,” she said of rising prices. “I believe Marion County is a great place to live.”

Will prices keep climbing? “I don’t have a crystal ball. I would like to think we all learned a lesson this time," Morrison said. “Remember, we came from the recession (when the prices fell). We came from so low."

Many buyers are not just opening their wallets and paying regardless of higher prices, Morrison said.

“I’ll hear them say, ‘Let’s look at another property,’” she said. “It’s not like there’s no other properties on the market.”

But her advice to buyers is always the same: Get your finances in order and be prepared to make an offer on a house you like today.

Her advice to sellers? Be ready to move within two weeks of putting your house on the market.

That took Kristy and Brendon Ehlers by surprise. They put their three-bedroom, two-bath house with an oversized garage on the market in July.

“We had listed it high thinking it would be a little while before it sold,” Kristy Ehlers said. “We had listed it high thinking let’s see what happens. We didn’t list it to sell.”

“We had showings the very next day,” she added. And the house sold within a month.

That meant meant they would become buyers themselves and have to face a sellers’ market.

Eventually they found a home, but had to live with family members for a few weeks.

Kyle McClary sold his home less than 24 hours after posting his “for sale” sign. In fact, he said, buyers got into a bidding war over the property, and it sold it for $3,000 over the appraised value.

What isn’t filling the breach in the dwindling supply, at least for now, is new home construction.

“It’s just not keeping up yet,” Morrison said.

Builders downsized during the recession and may be more hesitant to jump in with both feet to build homes on spec, she said.

In addition, many buyers don’t want to wait and build a home. The want a home that’s turn-key ready, she said.

“We live very busy lives,” Morrison said. “We work with many young professionals who are building their families, businesses and careers, and they’re looking for a (home) they can occupy now and not in six months.”

Data from Marion County’s Building Safety Department shows that while new home construction has increased, it’s not enough to make up for the dwindling, existing home supply.

The county issued an average of 128 single-family home construction permits each month between October and September of this year. That was up from 102 per month during the same period in 2016.

New home construction will not be running at a healthy clip and making up for the lack of existing homes on the market until those numbers are between 300-350 per month, said Michael Mazzurco, sales director for Armstrong Homes.

“I can say that at Armstrong Homes we are adding inventory,” he said.

Armstrong Homes survived during the recession doing what work it could, from new construction to home additions, Mazzurco said. That kept the business afloat and, now, able to use its own money, and secure loans, to build homes on speculation.

Two years ago, only about one-fourth of the company’s home construction was speculative homes, meaning the company built the home without a customer and on speculation that someone would buy it once it was completed. Now, nearly half the homes the company builds are on spec.

Mazzurco said he thinks the building industry is getting better, as he sees builders working in communities that were nearly vacant of new construction just a year ago.

And while county data shows a lagging permit trend, Mazzurco said it takes a couple of months before a permit request makes its way to county building regulators and onto the county’s reports.

Meanwhile, many builders are still recovering from the recession and don’t have the financial ability to borrow money to build homes on spec, he said.

Mazzurco said it is also important to remember that many people bought existing homes during the recession and have improved them with swimming pools, refurbished kitchens and bathrooms. With all that work done, they now want to enjoy their homes, not sell them. That part of the cycle will just take time to work its way through to where those buyers eventually want something else and move on.

Marion County is not alone on this score. Last week, the National Association of Realtors reported that the median duration of owners staying in their homes is 10 years. It was the same in 2016 and 2014, according to the Wall Street Journal, and the highest since 1985.

The housing shortage is taking its toll. Mazzurco said more customers tell him they are tired of looking for an existing home to buy and want a newly constructed home. That’s going to become more of the norm in the next 12 to 18 months, he said.

Mazzurco said he thinks more regional and national builders with their own financial backing will come into the area and start building. That will be accompanied by banks loosening up some of their lending requirements for spec homes, he said.

And when local Realtors start bringing clients to builders first rather than when they can’t find an existing home, that will signal the home building industry is on equal footing with the existing home market, he said.

Also facilitating new construction will be when the cost of a new home is within 10 percent of the cost of a comparable existing home, he said.

Until then, “it’s a seller’s market. No question about it.”

Reach Fred Hiers at fred.hiers@star-banner .com and 397-5914.

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